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Robber Barons behind Payday Lending and Their Enablers

New Orleans In trying to take a close look at payday lenders, we’re always interested in who the money bags are behind these predatory lenders who are feasting on lower income and desperate families. It’s not a pretty picture and the perhaps the worst snapshot comes from looking at one of the world’s big outfits, Money Mart, and the man ultimately holding the purse strings and the profits, John Grayken.

Talk about a robber baron, this guy specializes in what is euphemistically called “distressed” properties, but more often seems to be simply anyone distressed and desperate. He’s a billionaire of course, joining the Forbes list this year with over $6 billion to his name. He owns something called Lone Star, which of course is headquartered in Dallas, where his career began doing deals with the Bass Brothers and their oil fortune. He started flipping properties for them in partnership with the Federal Deposit Insurance Corporation (FDIC) back in the savings and loan crisis, and you could almost say, he’s gone down from there with a gaggle of private equity funds and more bottom fishing. An article in Forbes in March, doesn’t draw a pretty picture of his work:

Since the Great Recession Grayken has made a specialty of buying up distressed and delinquent home mortgages from government agencies and banks worldwide. He’s also picked up a major payday lender, a Spanish home builder and an Irish hotel chain. Regulators hassle him, and the homeowners whose mortgages he owns or services despise his tactics. In fact, he has become accustomed to taking shots from detractors and has been the subject of protests from New York to Berlin to Seoul. Last year New York Attorney General Eric Schneiderman reportedly opened an investigation into Grayken’s heavy-handed mortgage-servicing tactics, including aggressive foreclosures, which have unleashed widespread outcries from homeowners, housing advocates and trade unions.

The “major payday lender” was Dollar Financial Services (DFS) which specializes in pawnshops and payday lending through its ownership of Money Mart, the largest predatory lender in Canada with other offices around the world, including the United Kingdom where it is also the largest payday loan operator through the Money Shop, along with other brands.

Before Dallas he was a Massachusetts native, though he has now renounced his US citizenship for an Irish passport in order to pay less taxes, meaning he can’t spend more than 120 days a year on US-soil. I doubt if this is the kind of “inversion” that fellow billionaire, Donald Trump, is talking about stopping if he ever gets to sleep in the White House. Grayken is really a citizen of nowhere, and pretty much in trouble almost everywhere he operates for his predatory tactics.

Sadly, predatory lending and vulture acquisition of foreclosed homes pays well, so the returns on his equity funds are in the double digits, and, according to Forbes, they have made this robber baron especially popular among pension funds. Oregon is a good example though they are not the only ones slurping from this poisoned well:

The Oregon Public Employees Retirement System has invested $2.2 billion in many of Lone Star’s funds. In 2013, for example, it committed $180 million in Lone Star Fund VIII and has already posted annualized net returns of 29%. A $4.6 billion fund Grayken raised in 2010 has returned 52% per year to Oregon pensioners.

When you start following the money in the predatory, payday lending world, make sure you have a shower handy, because this is dirty, dirty business. Of course for Grayken and his jealous peers and greedy investors, this is just the way business is done. Done to us, that is!